Zynga (Symbol ZNGA) was a once beloved company with no end in sight, until suddenly it wasn’t. Once home to the top gaming development talent, hit games, and a high school size pile of money, Zynga had world conquer within its grasp.
Then the unthinkable happened. Zynga couldn’t continue to quickly produce massive hits quarter after quarter, and since they couldn’t do it themselves, they did what any rich American company would do. Buy the people who might be able to do it for you. Zynga began buying up a bunch of companies and tried to capitalize on their talent and ideas. A quick Google search and you can find all the various studio purchases ($180,000,000 for OMGPOP as a note-able purchase).
But yet, Zynga continues to fail to find enough break out games. In fact the last 4 quarters have been negative earnings, and that high school size pile of money is now a high school size pile of money without a gym.
I purpose a solution to Zynga’s problem. Farming.
It’s time that Zynga abandons its crazy policy of buying up studios trying to hit the next big thing and begins to buy into a market sure to “grow”… farming. It’s time … for real life FarmVille.
The average cost of a farm acre is roughly $2100 an acre. Meaning that if Zynga took 60% of its short-term cash equivalents it could purchase about 378,000 acres of farm land. That’s almost seven Iowas in land mass.
Now I know how much you make per acre varies a lot, but I have to believe after a quick Google search you could net $300 per acre per year. Maybe more if you have a two season farm. That’s 378,000 x $300 = $113.4 Million a year. To add contrast, in Zynga’s only positive year it roughly had a gain of $127.06 million before tax. Last year it lost $404 Million.
I think you can make a pretty solid argument that it is in the best interest of the shareholders that Zynga considers this business model.